Investor’s List: Countries with Fixed Currency Exchange Rates

We’ve touched on the impact that currency risks can have on frontier market investments before, but countries with fixed exchange rates present a unique dilemma. On the one hand currencies are by definition stable, alleviating currency worries since FX volatility is near zero. On the other hand, they are susceptible to large one-off moves and de-peg risk. Investors in Venezuela experienced this firsthand last week when the country devalued its currency by 32%, from 4.3 VEB to 6.3 VEB per USD.

We scoured the web for a good list of countries that still use fixed currency rates and were left wanting. Existing ones out there contain outdated information, or are filled with currencies of small countries that are irrelevant even to frontier investors. This is why we have compiled a list of all countries that still maintain fixed currency exchange rates and have populations over 1 million (with some exceptions). By our count there are 36 relevant countries in all, listed below for future reference.

Interestingly the majority of these countries are pegged to the EUR (17 total), with the USD coming second (13 total). This will make things extra interesting if the Euro is ever broken up since many of these are themselves in a monetary union (pegged to another monetary union).

Africa is home to most of the fixed currency countries at 19, with 14 of them using the CFA franc that is pegged to the Euro and three pegged to the South African Rand (ZAR) as part of a Common Monetary Area. The Middle East is another bastion for fixed currency rates, with 7 countries all pegged to the USD. Nepal is the only country pegged to the Indian rupee, which given the volatile status of INR has increased talk of breaking away from this peg.

The full list of countries with fixed currency exchange rates, population greater than 1 million: (last updated Feb 2015)

Country

Region

Ccy Name

Code

Peg Rate

Peg Ccy

Rate Since

Bahrain

Middle East

Dinar

BHD

0.376

USD

2001

Benin

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Bosnia and Herzegovina

Europe

Convertible Mark

BAM

1.95583

EUR

2002

Bulgaria

Europe

Lev

BGN

1.95583

EUR

2002

Burkina Faso

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Cameroon

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Central African Republic

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Chad

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Cuba

Central America

Convertible Peso

CUC

1

USD

2011

Denmark

Europe

Krone

DKK

7.46038

EUR

1999

Dijibouti

Africa

Franc

DJF

177.721

USD

1973

Equatorial Guinea

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Eritrea

Africa

Nakfa

ERN

15

USD

2005

Gabon

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Guinea-Bissau

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Hong Kong

Asia

Dollar

HKD

7.75-7.85

USD

1998

Ivory Coast

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Jordan

Middle East

Dinar

JOD

0.709

USD

1995

Lebanon

Middle East

Pound

LBP

1507.5

USD

1997

Lesotho

Africa

Loti

LSL

1

ZAR

1980

Mali

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Namibia

Africa

Dollar

NAD

1

ZAR

1993

Nepal

Asia

Rupee

NPR

1.6

INR

1993

Niger

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Oman

Middle East

Rial

OMR

0.3845

USD

1986

Panama

Central America

Balboa

PAB

1

USD

1904

Qatar

Middle East

Riyal

QAR

3.64

USD

2001

Republic of the Congo

Africa

Central African CFA Franc

XAF

655.957

EUR

1999

Saudi Arabia

Middle East

Riyal

SAR

3.75

USD

2003

Senegal

Africa

West African CFA Franc

XOF

655.957

EUR

1999

Swaziland

Africa

Lilangeni

SZL

1

ZAR

1974

Togo

Africa

West African CFA Franc

XOF

655.957

EUR

1999

United Arab Emirates

Middle East

Dirham

AED

3.6725

USD

1997

Venezuela

South America

Bolivar

VEB

6.3

USD

2013

Updated Feb 2015:
– reordered in alphabetical order
– removed Latvia and Lithuania, which joined the Euro in 2014

[…] understand that the whole region seems to be moving towards unified currencies with West Africa and Central Africa already using the CFA Franc, and the West African contingent working to adopt a new currency, the […]

Hi Terry, China releases a fix midpoint everyday and has a trading band of +/- 1% around it. However, the fix midpoint moves everyday so the band is moving (unlike in Hong Kong which is included in the list above), and the currency has strengthened significantly over the past few years. There has also been much talk of the band widening further as they move towards internationalization of the currency, so in most regards China does not have a fixed exchange rate.

[…] be nothing to stop an independent Scotland “pegging” a Scottish pound to the British pound. Many countries, including many successful ones, peg their currencies either to the Dollar or the Euro. This […]

Kuwait is pegged to a basket of currencies and not to the USD, and it does fluctuate so we did not include it. In general this list does not include countries that peg their currency to a basket of other currencies, like the Singapore dollar, since the currency itself still moves and the composition of the baskets usually change as well.